Levine Leichtman Near Close On SBIC Fund

Firm: Levine Leichtman Capital Partners

Fund: Levine Leichtman Capital Partners SBIC Fund LP

Target: $75 million

Placement Agent: None

Levine Leichtman Capital Partners is close to raising $75 million for a fund organized as a small business investment company, a structure that is often used to provide mezzanine financing although the strategy of this particular fund is not clear.

The Los Angeles-based firm has raised $69.45 million for the fund, Levine Leichtman Capital Partners SBIC Fund LP, according to a recent regulatory filing.

Levine Leichtman joins a growing list of firms of all sizes turning to SBIC funds as a fast, flexible source of capital at a time when raising new, traditional buyout funds is a challenge and debt financing is pricey. Other firms recently raising SBIC funds include The Riverside Company, Perseus LLC and LongueVue Capital.

Levine Leichtman, founded in 1984, manages $5 billion of committed capital. The firm invests across a variety of sectors in the mid-market and is currently investing from Levine Leichtman Capital Partners IV L.P., a $1.1 billion fund. Its portfolio includes Beef ‘O’ Brady’s, a sports-themed restaurant franchise; Carpets N More, a provider of flooring products to the home construction market; and Interdent, a company that provides dental practice management services.

Under the SBIC arrangement, firms can raise as much as $75 million and borrow up to $150 million more, ultimatley financing its portfolio from the SBIC Funding Corp., an arm of the U.S. Small Business Administration, at a rate tied to 10-year Treasury bonds. The funds typically max out at $225 million.

The U.S. Small Business Administration reported in October 2010 that it had issued 21 SBIC licenses in fiscal 2010, ended Sept. 30, more than double the 10 licenses a year that the agency had averaged over the preceding four years. Total SBA financings through the SBIC debenture program grew to $1.59 billion, a record, up 23 percent from the average of the prior four years.

Executives at Levine Leichtman did not reply to requests for comment.